EBA final guidelines for crisis management and token redemption under MiCAR: Protecting ART and EMT holders
10 Dec 2024
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On 9 October 2024, the European Banking Authority (EBA) released its final guidelines relating to the orderly redemption of token holders in the event that the issuer is unable or likely to be unable to fulfil its obligations in relation to asset-referenced tokens (ARTs) and e-money tokens (EMTs). These guidelines were developed under the Markets in Crypto-Assets Regulation (MiCAR) and aim to protect token holders by ensuring issuers that have effective plans in place for redeeming tokens in the mentioned circumstances.
These guidelines help issuers to prepare for those mentioned circumstances by outlining liquidation strategies, redemption processes, and critical activities.
Key aspects of the guidelines:
- Redemption plans: Issuers of ARTs and EMTs must develop detailed plans outlining how they will liquidate assets to redeem tokens. These plans must identify critical activities, explain the redemption process, and establish clear triggers for when these plans should be activated. Plans are typically triggered when a competent authority determines that the issuer is "unable or likely to be unable to fulfil its obligations towards the token holders," such as in cases of insolvency or withdrawal of authorisation.
- Flexibility and clarity: In response to feedback from public consultations, the EBA introduced some flexibility, especially for EMT issuers, in how assets can be liquidated. This ensures that redemption plans are practical and can be applied effectively across different types of issuers.
- Proportionality and governance: The guidelines highlight the importance of proportionality in the redemption plans. Issuers are required to outline governance structures, identify responsible individuals, and specify the critical activities necessary to ensure token holders can be redeemed fairly and efficiently.
- Legal basis and exceptions: These guidelines were developed under MiCAR Articles 47(5) and 55, applying to both ART and EMT issuers. However, exceptions exist for some EMT issuers, such as credit institutions, which may not need to maintain a reserve of assets unless required by authorities.
- Communication and coordination: Issuers must also develop communication plans to keep token holders informed about the redemption process, timelines, and any necessary updates. Moreover, smooth coordination between relevant authorities is vital to ensuring fair and transparent redemption during the mentioned circumstances.
- Implementation: The guidelines will be translated into all official EU languages and published on the EBA’s website. Competent authorities will have two months to report their compliance after publication, with the guidelines taking effect two months later.
The press release can be found here and the final report on the guidelines can be accessed here.
